Fortune in Farms

SWEET SUCCESS |

The fortune in farms-Narendra Murkumbi

SUMMARY

“The Impossible is what you believe cannot be done. The limits are in your own thinking”

Sweet success is a story of how a person with a small idea makes it big not only for himself but also for the farmers who helped him grow big.

Narendra Murkumbi, IIM A PGP '94 is one of the 25 entrepreneurs featured by Stay Hungry Stay Foolish in a cover story on IIMA’s alumnus who made it big. Others in the list include Sanjeeev Bhikhchandani, R Subramaniam, Rashesh Shah and many more. 

In sugar, a sector dominated by old, established players, Narendra Murkumbi, first-time entrepreneur with his mother Vidya Murukumbi, experimented with an asset-light, capital-light business model. They chose to buy old units rather than set up new ones. They chose to lease out factories rather than invest in new facilities. Result: with little capital, Shree Renuka Sugars became India’s eighth largest sugar company. More importantly, it earns a 46 per cent return on capital employed, the highest in the industry and almost double the industry average of 20-25 per cent.

Murkumbi, when he graduated from IIM-Ahmedabad in 1994, he knew he wanted to be in agri-business. After a brief experiment with bio-pesticides, which he closed after deeming a Rs 50 crore company too small, it was sugar that caught his fancy. With great difficulty, he convinced IDBI to lend up to 60 per cent of that cost. He also got the Sugar Development Fund to contribute another 15 per cent of the project cost as equity. He then went about raising the remaining 25 per cent. But, after exhausting his options, he was still about Rs 5 crore short. The stock market was indifferent to the sugar industry. So an IPO was ruled out. That’s when he turned to the farmers who were used to a culture of investing because of the co-operative mills. His mother, Vidya Murkumbi, chairperson of SRS, visited 80 villages to talk to the farmers. By...